Big question mark hangs over Fed testimony today
Markets will not be happy if Yellen blindly adheres to staff’s astrology tables
US small businesses have stopped raising prices, according to the just-released June survey of the National Federation of Independent Business. Only 1% more firms raised prices rather than lowered them in June, vs. 7% in May.
This is another sign that the Fed’s inflation target might as well be on the dark side of the moon. The Fed staff thinks it is en route to a stable 2% inflation rate by 2019, but the real world doesn’t seem to agree. All of the supposed one-off, idiosyncratic, temporary price reductions (mobile phone plans, pharmaceuticals, and so forth) are starting to look like points on a trend line.
That leaves a big question mark over Fed Chair Janet Yellen’s testimony today: If Yellen sticks to the astrology tables concocted by her staff and insists that the Fed has to lean against resurgent inflation, the markets won’t like it at all.